National Fulfillment files for bankruptcy; state moves to continue action

Monday, October 29, 2007 at 1:23am

National Fulfillment Inc., a beleaguered Lebanon company founded by recently deceased Roland “Rollie” Froehlig, has filed for Chapter 11 bankruptcy and likely will soon close its doors permanently.

And on Friday, the Tennessee Attorney General’s office submitted a filing that states the agency’s intention to continue pursuing action against the company.

National Fulfillment’s acting president, Ted Howes, attributed in a Friday statement the company’s troubles in part to the death of Froehlig, as well as to the ongoing legal action against the company by the state of Tennessee.

Froehlig died in his office last month.

“This action was necessary in order to protect the creditors and consumers that National Fulfillment, Inc. has dealt with over the years,” Howes said. “Since the State of Tennessee took action against the company, the company’s sales fell sharply due to customers leaving the company.”

The Attorney General’s office on Friday filed in Williamson County Chancery Court a notice stating the state’s intention to continue its civil action against National Fulfillment.

According to the filing, National Fulfillment’s bankruptcy petition was submitted four days after the state moved for a receiver to be appointed over the corporate defendants, and for the asset freeze against the companies to be renewed. A hearing for both moths was scheduled for today.

“Ordinarily, the automatic stay provision of the bankruptcy code… prevents pending actions from moving forward,” the filing reads. “The bankruptcy code, case law, and legislative history all make clear that pending consumer protection actions brought by state attorneys general are not stayed by a bankruptcy petition.”

Froehlig — along with National Fulfillment, related company Entertainment America Inc., and Howes — are the named defendants in a civil suit filed by the Attorney General’s office in February. The state’s suit resulted in a total of $300,000 in assets frozen, with no time frame set for post-investigation court dates.

The suit claims the defendants billed about 30,000 consumers, and attempted to bill about 300,000 consumers, $19.90 each for exercise bands that never existed. The state also alleges that the companies “unlawfully harvested” financial information including credit and debit card numbers from customers of current and past clients. Froehlig, Howes and their attorneys have denied all charges.

At the time of his death, Froehlig owned approximately 56 percent of National Fulfillment. Howes owned 2 percent, also according to court documents, and a small number of investors owned the rest.

The company’s board of directors includes Howes and another National Fulfillment employee, Vicki Martin, according to court documents.

National Fulfillment employed 250 at the time of the suit. Part of the company’s business involves billing, shipping and customer services to sellers of products advertised on cable television or infomercial ads.

National Fulfillment attorney David Herbert, of Nashville law firm Ortale, Kelley, Herbert & Crawford, said Friday that it is his understanding that the company has ceased most of its operations.

“I think most of the employees have been laid off,” he said.

According to the Chapter 11 documents, filed Oct. 25 in the U.S. Bankruptcy Court’s Middle Tennessee District, National Fulfillment currently has less than $10,000 in assets and less than $50,000 in liabilities. A total of 31 creditors are listed, including Martin, Howe, Herbert, Froehlig’s estate, and Entertainment America. The Tennessee Department of Revenue is on the list, as are several Nashville- and Lebanon-based attorneys.